Gross gaming revenue suffers record plunge from virus blow

GROSS gaming revenue reported a record drop in Macau last month, down 87.8% from a year earlier, according to data from the Gaming Inspection and Coordination Bureau. Macau revenue amounted to 3.1 billion patacas ($386.5 million) in February, having fallen to levels not seen in more than 15 years. In a survey, analysts had predicted a median 90% slide, with most holding that the unprecedented decline will persist into March. Year-to-date revenue sits at 25.2 billion patacas, down almost 50% compared to a year earlier. The slump follows a decision by the government to suspend casino operations from February 5 for just over two weeks, dealing another blow to the gambling mecca that’s already struggling to recover from a revenue decline in 2019. The closure was the longest on record and only the second such instance, after a typhoon in 2018 forced a 33hour shutdown.

Even after the partial resumption of business from February 20, gaming floors have seen few footfalls as China continued to halt individual and group visas to Macau and restrict transportation in a prolonged fight against the spread of the virus. The respiratory disease has killed more than 2,900 people, most of them in China, while the number of infections has topped 85,000 globally. Measures to control the epidemic and people’s reluctance to visit crowded places have curtailed spending, weighing on China’s $14 trillion economy, half of which has remained idle since late January. Casinos are about to take “an extremely bumpy ride” in 2020, according to a Feb. 25 note by DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong. He estimates gaming revenue will drop 24% and industry earnings before interest, tax, depreciation and amortization will plummet 30% this year. Galaxy Entertainment Group’s Deputy Chairman Francis Lui said late last week that the impact of the virus “won’t be small.” He said he expects construction of the company’s new casinos in Macau will be slowed by the virus outbreak. Last year, gross gaming revenue dropped 3.4% in year-on-year terms to about 292 billion patacas.

Macau casinos struggled to adjust to a perfect storm of economic headwinds, including fallout from the China-U.S. trade war, relentless protests in neighboring Hong Kong and a crackdown on online gambling in both Macau and the mainland. The year ended with a visit by President Xi Jinping in December, when gross gaming revenue tumbled 13.7%. Prior to the coronavirus outbreak, analysts had expected a bounce on pent-up demand in the first few months of the year. That bounce may yet come with some analysts still predicting a recovery as early as the second half of this year.

Fourth quarter decline

Macau’s economy contracted by the most in almost four years in the fourth quarter, even before the coronavirus outbreak forced its casinos to shut down for about two weeks. The city’s gross domestic product fell 8.1% in the fourth quarter from a year earlier, the most since the first three months of 2016. That was almost double
the revised 4.4% decline in the previous three months, as revenue from casinos slumped 8.4%. The economy of Macau has experienced negative growth since the first quarter of 2019, owing to decreases in investment and exports of services, according to the local government. The city’s economy shrank 4.7% in 2019.